Research Questions Whether Or Not Incubators Help Startups

There are more than 1,400 business incubators in the U.S., according to the National Business Incubator Association. These incubators are thought of as giving a helping hand to startups and entrepreneurs, providing them with a variety of services, from the basics like Internet access and office space to guidance about things like business finance, making presentations, raising money and managing intellectual property.

Although the terms incubator and accelerator get thrown around a lot, the main difference between these two entities has historically been that incubators are a shared work space with many other startups and no particular ending date to their stay. Accelerators are more programmatic, involving a cohort of startups that participate for about 3-4 months and then “graduate.”

Researchers at the Kauffman Foundation recently analyzed more than 35 academic articles about business incubators—including a review paper that systematically examined 38 studies—and found some important takeaways from the literature.

Yas Motoyama, director of research and policy at Kauffman and his research assistant, Emily Fetsch, found that despite the hype around incubators about the help they give startups, they may not be doing any better at launching successful businesses than entrepreneurs outside of incubators.

“The research hasn’t proven that businesses are more successful if they come out of an incubator,” says Fetsch.

Incubators promise a lot of resources to startups, like office space, printers, paper, events, networking, assistance connecting startup founders to funders, help with presentations and many other services, says Fetsch. “But the average incubator actually has less than two full-time staff and 25 businesses. That’s a lot of service to provide for two people. So are they really providing all the services they say? It seems unlikely,” she says.

Although incubated businesses have slightly higher employment, growth and sales, they also have slightly lower survival rates after they graduate. Overall, say the researchers, the difference in performance between incubated and unincubated businesses is marginal. One research paper Fetsch examined found no significant difference between incubated and non-incubated businesses. She cautions that one paper isn’t enough to determine whether or not incubators work, but she’s also concerned that so many entrepreneurs, policymakers and incubator providers believe incubators are a boon for startups. “There’s no evidence of that yet,” says Fetsch.

Motoyama and Fetsch also note a trend that’s been happening in the last three years, of incubators trying to rebrand themselves as accelerators. (A few well-known accelerators are Y Combinator and Techstars.) “There’s something about supporting entrepreneurship,” says Motoyama, “people tend to go for the trendy thing. If there’s some kind of new, emerging successful thing, people try to jump on that.” He says there’s no convincing research yet as to the effectiveness of accelerators. “Y Combinator and TechStars seem to be outliers. They are totally different players, unlike the vast majority of accelerators.”

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